Irish employers making ‘generous’ contributions to DC plans: survey

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The vast majority of employers in Ireland contribute more than 5% of salary to replacement defined contribution (DC) pension plans, according to the Irish Association of Pension Funds (IAPF).

DC schemes have replaced defined benefit (DB) schemes in 88% of cases, according to a survey carried out by the association. The balance comprised Personal Retirement Savings Accounts and hybrid structures.

Of the new schemes established, the maximum employer contribution rate exceeded 10% for half of the schemes, with 8% of employers contributing more than 15% of salary.

In total, the IAPF said, 86% of schemes paid more than the traditional, typical contribution rate of 5%.

Commenting on the findings, Jerry Moriarty, CEO of the IAPF, said: “While the migration from the much-coveted defined benefit scheme over the last few years has been difficult for many employees, our survey has revealed that those employers who have replaced the DB pension structure with a DC structure are making relatively generous contributions into those schemes on behalf of employees.”

In 44% of new DC arrangements “matching” was the most common employer/employee contribution structure, the IAPF said. This was where the employer would increase contributions to the plan at the same rate the employee agreed to increase theirs.

The employer would typically pay up to a maximum of 10%-15% of salary, the survey indicated, with the employee’s contribution usually being less than that.

Most other employers – 38% – had committed to a level or fixed-rate contribution, typically somewhere between 5%-12%.

The balance of the DC replacement plans operated either age-related, grade-related or service-related contribution structures.

The survey was of 65 companies, covering more than 60,000 pension plan members and pension savings in excess of €20bn.

It found that one in five companies still had a DB plan that was open to new entrants and future benefit accrual.

About three-quarters had legacy DB arrangements in place, with half of these closed to future accrual.

More than 63% of the schemes captured by the survey had de-risked their investment strategy, the IAPF reported.